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Premier Rides, Inc. v. Stepanian

United States District Court, D. Maryland

February 23, 2018

PREMIER RIDES, INC. Plaintiff
v.
MARK STEPANIAN Defendant

          MEMORANDUM & ORDER RE: PRELIMINARY INJUNCTION

          Marvin J. Garbis, United States District Judge

         The Court has before it Plaintiff's request for injunctive relief following the Court's denial [ECF No. 7} of Plaintiff's Request for Temporary Restraining Order [ECF No. 3]. The Court has reviewed the materials submitted relating thereto and has held a hearing, including testimony and the presentation of evidence. The Court has made the factual findings stated herein based on its evaluation of the evidence and the reasonable inferences drawn therefrom.

         I. INTRODUCTION

         Plaintiff, Premier Rides, Inc. (“Premier Rides”) commenced the instant action against its former employee, Mark Stepanian (“Stepanian”) on November 15, 2017 in the Circuit Court for Baltimore City. Premier Rides alleged that Stepanian breached the covenant not to compete that was contained within the NonDisclosure, Non-Competition and Non-Solicitation Agreement (“the Agreement”) by working as an employee or contractor with a competitor, DreamCraft Attractions Ltd. (“DreamCraft”). Premier Rides sought a Temporary Restraining Order to prevent Stepanian from violating the restrictive covenant.

         Stepanian filed his Notice of Removal [ECF No. 1] to this Court on the basis of diversity jurisdiction[1] on November 20, 2017. On the same date, he filed the Declaration of Mark Stepanian [ECF No. 4] stating that DreamCraft does not compete with Premier Rides. Under the circumstances, the Court denied Premier Rides' request for a Temporary Restraining Order but allowed Premier Rides to proceed with an evidentiary hearing seeking preliminary injunctive relief. The issue is now ripe for resolution.

         II. BACKGROUND

         A. The Agreement

         The Non-Disclosure, Non-Competition and Non-Solicitation Agreement was signed by Premier Rides, as “Company, ” and Mark Stepanian, as “Employee, ” on September 24, 2013, three months after Stepanian began working at Premier Rides. Pertinent to the instant dispute, [2] Paragraph 8 of the Agreement, the noncompetition provision, provides:

Employee agrees that during his employment and for a period of 12 months after termination of that employment . . . he shall not, on his own behalf or as a partner, officer, director, employee, independent contractor, agent, or consultant of any other person or entity directly or indirectly, engage or attempt to engage in the business of providing goods or services the same as or similar to the goods or services of the Company. Employee shall not involve himself in a capacity the same as or similar to the capacity he served at the Company with any kind of business or enterprise that competes directly or indirectly with the Company's business. Employee understands that this means that he is not permitted to be employed by or perform contract work in a capacity the same as or similar to the capacity he served at the Company for a business or enterprise in the Company's business. Employee expressly acknowledges that the Company is entitled to a court order enjoining any violation of this paragraph even if Employee has not solicited or serviced any of the Company's Customers. The restrictions in paragraphs 8 and 9 of this Agreement are intended to limit Employee from competing with the Company in its role in the design, fabrication, and construction of amusement rides and attractions, and the sales of parts and services for existing amusement rides and attractions.
This paragraph does not prevent Employee from becoming employed by any person, government agency, firm, company, partnership, corporation, or other entity which is an end user of amusement rides including but not limited to, operators of amusement parks. This Agreement does not prevent Employee from accepting employment or otherwise becoming involved with entities which solicit Customers of the Company for services or products other than the kinds of services or products provided by the Company to any entity. Employee may work for a subcontractor of the Company without violating the restrictions in paragraphs 8 and 9 of this Agreement provided the subcontractor does not compete with the Company.

Agreement ¶ 8, Compl. Ex. A, ECF No. 2-1 (emphasis added).

         Referenced in Paragraph 8, Paragraph 9 further restricts Employee regarding non-solicitation:

Employee shall not, during his employment and for a period of 12 months after his separation from employment . . . either alone, in conjunction with or through the use of others, whether as principal, agent, employee, trustee or through the agency of any person or entity, canvass, solicit or accept business from any Customer of the Company with which Employee had contact during the 24 months prior to his separation from employment . . . if the services or products to be provided to said Customer are the same as or similar to the services and products which are or were provided to said Customer by the Company.

Id. ¶ 9.

         B. The Amusement Rides Industry

         The Amusement Rides Industry is an industry with few direct competitors. Potential customers range from amusement parks to shopping malls, zoos, and aquariums. The market itself is global and the current primary growth area is in Asia and the Middle East. Everyone in the industry tries to sell to the same customers.

         The trade association of the industry, the International Association of Amusement Parks and Attractions (“IAAPA”), hosts trade shows, the largest of which is held annually in Orlando with approximately 40, 000 people in attendance each year. The trade shows are the primary environment for networking and commercial interaction. Volunteer organizations for the development and promotion of safety standards and safety education have been developed and peopled by members of the industry, both suppliers and customers.

         C. Premier Rides

         Premier Rides is a Baltimore, Maryland-based company that designs, fabricates, and constructs amusement rides and themed attractions, such as roller coasters, virtual reality rides, towers, and pedal rails. It also sells parts and services for existing rides and attractions. Premier Rides generally sells the hardware, but it is combined with software[3] and other theming elements to create a highly-themed attraction. Premier Rides' main focus is on designing and manufacturing highly-themed roller coasters, and it also sells flying theaters[4] and motion-base[5] attractions. Premier Rides incorporates virtual reality into some of its themed rides, and has installed virtual-reality headsets into rides, but it does not design or manufacture virtual-reality headsets.

         Premier Rides' customers include familiar names such as Six Flags, Cedar Fair, Evergrande, Palace Entertainment, Trans Studio, SeaWorld, and Universal Studios. Premier Rides is also working on a project for Wanda, a large Chinese real estate development company. Premier Rides' competitors include a Swiss company, Intamin Rides, a German company, MACK Rides, and Canadian companies, Dynamic Attractions and CAVU Designwerks, Inc. (“CAVU”).

         D. DreamCraft

         DreamCraft, based in Victoria, British Columbia, Canada, designs and manufactures virtual-reality headsets. DreamCraft was formed in 2016 by a strategic partnership between CAVU and another Victoria-based company, One Bit Labs, Inc.[6] DreamCraft's website indicates that DreamCraft is “a CAVU Company.” Pl.'s Ex. 7.

         DreamCraft is a preferred supplier and subcontracts to CAVU, and the companies work closely together, sharing the same mailing address and having certain senior management in common. For example, Peter Schnable, the founder and Chief Executive Officer (“CEO”) of CAVU is a corporate director and past CEO of DreamCraft;[7] Ken Yao, the President and Chief Financial Officer (“CFO”) of CAVU is the CFO of DreamCraft. DreamCraft and CAVU coordinated adjoining booths at IAAPA, sharing a joint marketing video in which DreamCraft was referred to as a sister company that CAVU created to improve the virtual reality experience.

         DreamCraft's website promotes attractions that its team has worked on to demonstrate DreamCraft's expertise in the attractions industry, including three rides[8] that are Premier Rides' attractions. DreamCraft does not design or manufacture roller coasters, motion-based rides, or flying theaters.[9]DreamCraft is a virtual reality and augmented reality service provider. Its focus is to design and build virtual-reality headsets[10] that can be incorporated into amusement attractions.

         E. Mark Stepanian

         Mark Stepanian is a 27-year-old structural engineer living in Alexandria, Virginia. He obtained his degree in structural engineering from Cornell University in May 2013 and initially began working with Premier Rides as an intern[11] in June 2012 while still in school. Premier Rides offered him a full-time position in April 2013, and he began working for Premier Rides after graduation in May 2013 as an entry-level project engineer.

         At Premier Rides, Stepanian started in the parts and service division, performing evaluations and maintenance on roller coasters. He also worked on a service project that involved moving a spinning ride called Sandstorm from one theme park to a different theme park in another state. After a year, Stepanian moved to the roller coaster division, where he worked until he left Premier Rides in May 2017.

         In the roller coaster division, Stepanian provided technical sales support, [12] oversaw the design and integration of rides and systems that manage rides, worked with contractors and vendors, certified built roller coasters as meeting safety standards, maintained project budgets, and prepared maintenance manuals. He also provided support to the company at the IAAPA conference each year and participated in voluntary safety standards organizations as a representative of Premier Rides. Projects that Stepanian worked on included the Wanda Monkey Kingdom ride, the Adventure Dining motion-base ride, a dark ride roller coaster in Doha, the Guangzhou Chimelong roller coaster, and he assisted the sales presentation to Universal Studios related to the Mario Kart video game ride.

         After deciding to leave Premier Rides and seek other employment, Stepanian consulted with legal counsel. In his resignation letter of May 22, 2017, he formally asked to be released from his non-compete obligation in the Agreement.[13] By letter on May 26, 2017, Premier Rides refused to release Stepanian. Shortly thereafter, on May 28, 2017, Stepanian communicated to a co-worker that he would not be going to work for CAVU and was looking at other offers because he did not want to end up in a lawsuit with Premier Rides. For the same reason, he also turned down an offer from S&S, a roller coaster manufacturer that he considered a Premier Rides' competitor. Stepanian continued to look for and apply for non-competitive opportunities through online job-boards.

         On June 1, 2017, Stepanian was contacted by Peter Schnable, who identified himself as an investor in DreamCraft, to discuss an opportunity to work at DreamCraft. On June 7, 2017, Stepanian entered into a contract with DreamCraft to be its Director of Technical Services. Stepanian works remotely from his home in Virginia and reports directly to Ken Yao, DreamCraft's CFO. Within his first two weeks on the job, Stepanian spent three days at CAVU's Dallas, Texas office being briefed by CAVU's then-President on the scope of a CAVU project that was being subcontracted to DreamCraft to incorporate virtual reality hardware and software. Shortly after, on June 26, 2017, Stepanian met with David Reitterer, CAVU's former technical director, in Guangzhou, China to evaluate a motion-base ride and determine how easily DreamCraft's headsets could be incorporated into the predesigned motion-base system. On the same trip, Stepanian visited the Genting Park rides in Malaysia, including the CAVU rides in Genting Park.

         Since leaving Premier Rides, Stepanian has corresponded with some Premier Rides' customers to inform them of his departure. During his job search, he interviewed with Six Flags, a Premier Rides' customer. He has also kept in touch[14]with Aileen Hu from Wanda, with whom he worked on the Premier Rides' project for Wanda. Since working with DreamCraft, he has attended meetings[15] with companies who were customers of Premier Rides, including Six Flags, Cedar Fair, Evergrande, Palace Entertainment, Trans Studio, SeaWorld, Universal Studios, and Busch Gardens. Stepanian's job at DreamCraft includes technical sales support related to adding virtual reality to attractions. Stepanian married in June 2016, and his current DreamCraft salary of $120, 000 per year is the family's sole income since his wife attends graduate school. Stepanian is also attending Johns Hopkins Carey Business School and has one more semester to complete an MBA with a focus in finance and management.

         III. LEGAL STANDARD

         “The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held.” United States v. South Carolina, 720 F.3d 518, 524 (4th Cir. 2013) (quoting Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)). “A preliminary injunction is an extraordinary remedy, to be granted only if the moving party clearly establishes entitlement to the relief sought.” Manning v. Hunt, 119 F.3d 254, 263 (4th Cir. 1997).

         To obtain a preliminary injunction, a plaintiff must show that:

1. It will likely succeed on the merits;
2. It is likely to suffer irreparable harm absent preliminary ...

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